Implementing system based asset classification in UCBs

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NEW DELHI, INDIA MAY 3: View of RBI buidling on May 3, 2013 in New Delhi, India. (Photo by Ramesh Pathania/Mint via Getty Images)

The Reserve Bank has asked Large Urban Cooperative Banks (UCBs) to undertake the system-based asset classification from June 30, 2021. The Central Bank expressed that this move is aimed at improving the efficiency, transparency, and integrity of the asset classification process. The UCBs having total assets of over Rs 2,000 crore as on March 31, 2020, will be required to implement the system-based asset classification from June 30, 2021, an RBI circular said.

The RBI said UCBs having total assets of ₹2,000 crore or above as on March 31, 2020, have to implement system-based asset classification with effect from June 30, 2021.

 UCB’s having total assets of over Rs 1,000 crore but less than Rs 2,000 crore as on March 31, 2020, and having self-assessed themselves as being under Level III or Level IV on the Comprehensive Cyber Security Framework will be required to implement system-based asset classification from September 30, 2021.

UCBs, which meet the above-mentioned criteria as at the end of the current or subsequent financial years, have to implement system-based asset classification within six months from the end of the financial year concerned.

Asset classification (downgrading as well as upgrading) carried out by the CBS or computerized systems of the bank in an automated manner on an ongoing basis, based on the relevant RBI instructions or guidelines is referred to as a system-based asset classification.

 RBI said that all concerned UCBs should conduct pilot/parallel run and evaluate the results to understand the accuracy as well as the integrity of the asset classification, in compliance with its applicable instructions for smooth implementation of the system. This is to ensure that they are ready for implementation of the system-based asset classification from the appointed date.

The Central Bank also encouraged UCBs that are not meeting the aforementioned criteria to voluntarily implement the system-based asset classification in their interest.

As of March-end 2019, there were 1,544 UCBs in the country. The share of UCBs with assets greater than ₹1,000 crore was at 6.5 percent in 2018-19.

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